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Pros and Cons of Small Business

When first considering the prospect of opening a small business, a person generally thinks only of the positive aspects of such a venture. The anticipation and excitement of working for one’s self, the ability to implement one’s own creative talents and the potential for greater wealth can be overwhelming as can the daunting tasks involved in opening a business. Though launching a small business presents several personal advantages, there are drawbacks as well and it is highly recommended that the budding entrepreneur be conscious of this and take the necessary steps required to minimize any negative outcomes. This article illuminates the many advantages and disadvantages of setting up a small business and then quickly explores the merits of purchasing an existing business, rather than starting one from the ground up.

For a person that embodies the true entrepreneurial spirit, the chief goal and appeal of opening a small business is to create something novel, not simply in managing someone else’s conception.  That is why starting a business of one’s own is an enticing notion. (Helfand, 2007).  Operating one’s own business can be advantageous in many ways.  First, and probably foremost is that a person can be their own boss.  They are therefore able to make their own decisions and set their own hours.  Nobody admonishes the owner for being late or taking an extra day’s vacation.  No one tells the boss where to be and when to be there.  Nothing other than the consumer is addressed by the owner of a small business and even this is an option.  Unreasonable clients can be fired.  The owner is not involved in petty organizational politics.  No one is trying to undermine your authority or accomplishments so as to ‘climb the corporate ladder’ quicker.  The owner of a small business is and always will be at the top.  There is no ceiling on a small business owner’s earnings potential. It’s the best way to realize the ‘ American dream. ‘ The more successful the business, the greater the profit, and the owner decides how to distribute the earnings.  Gone are the days of working for a pre-determined salary knowing that efforts made were probably making money for invisible investors who didn’t have a clue about the business nor appreciated the tremendous sacrifices that allowed it to profit.Pros and Cons of Small Business

The owner of a small business has the ability to develop unique skills and knowledge required for the growth of that business, rather than relying on the limited constraints of job duties defined by someone else.  If some or much of the work can be accomplished from home, no one has the authority to require you to be at the office.  The headaches of commuting can be curtailed or eliminated and the many desirable aspects of being home during the day can be realized.  The small business owner has the flexibility to choose their own hours and can, for example, swap a weekday at the beach then work on the weekend or simply take their wireless laptop to the shore.  If the owner wants to sleep-in, take a three hour lunch break or watch their child’s little league game without having to ask permission or make-up this time at a later date, it’s completely their decision.  All aspects of the business including personnel, finances, working conditions and personal time allocation are for the business owner alone to decide (“Pros and Cons”, n.d.).  In addition, the small business owner has the freedom of location, types of products produced and sold, which banker, accountant and lawyer to choose and which suppliers they wish to deal with.  The location can be the home if start-up capital is limited.  Businesses such as consulting, computer repair, writing and public relations can be started from a home-base (Gerson, 2004).

Among the negative aspects of starting a small business is the high rate of failure.  According to the Small Business Administration, 75 percent of businesses fail within the first year and 25 percent of those that survive the first year fail the second.  Because the majority of new businesses are financed primarily by the owner’s money, many are insufficiently capitalized.  Most small businesses lack a formal organizational structure which can have either a positive or negative component (Helfand, 2007).  To begin a new business takes much effort and time.  The prospective small business owner must first develop a detailed business plan, obtain financing, locate suppliers and purchase equipment needed to make the business functional.  A minimum of six to 12 months’ income should be saved before beginning a full-time business, a difficult task for many people.  It is also a time-consuming and arduous task to locate customers, develop a line of credit, obtain the necessary licenses, proper insurance and recruit a quality staff.  The owner of a new small business faces many uncertainties.  For example, “a competitor could open a business within a mile of your business and take all your customers away” (Gerson, 2004).

The freedom anticipated in owning a small business is generally severely limited because the owner finds that they must be continually working so that the operation has a chance to succeed.  Leisure time is practically non-existent and can be enjoyed only when it fits into the work schedule.  This time, if any, is hardly conducive to the planning of activities.  Normally, the owner of a new business can expect to work practically every waking moment for the first year at the very least.  This schedule creates fractured families and great amounts of stress.  So much so that it leads many new business owners to lament about the job they discarded for this new, exciting opportunity.  No longer can the owner put the blame of a failing business on the inefficiencies of the organization or co-workers.  They must take the responsibility for every aspect of its successes and failures and is under tremendous pressure to produce income not only for them but for their employees as well.  They no longer have a steady paycheck on which they can rely.  Vacations and other non-essential expenses are put on hold because of time or monetary constraints.  Small business owners are either at work or thinking about it every waking hour of every day.  Instead of depending on their performance alone to make a living wage, business owners must depend on their staff, suppliers and the whims of the marketplace to pay their bills.  In addition, the high stress levels contribute to adverse health issues (“Pros and Cons”, n.d.).

An advantage to buying an existing business is that a customer base is already established and, therefore, the business has a cash flow from the beginning.  The location is known to customers and relationships with suppliers, bankers, staffing and the landlord are already established.  Possible disadvantages include the difficulty in re-creating an existing business in the new owner’s own image and acclimating the inherited staff to the new owner’s particular methods of doing business.  The staff will, at least initially, resist changes as might the customers that developed a loyalty to the previous owner.  A business expert may have to be hired to evaluate the true value of a business prior to the purchase (Gerson, 2004).

This prior homework is necessary before starting any business venture, however.  “Before hazarding into the world of entrepreneurship and self-employment, you’ll need to do a lot of homework” (Bell, 2004).  The prospective new small business owner should extensively research their idea and prospective market then design a practical business plan which outlines the financial details and strategy for operation.  They should also strongly consider the personal impact of the decision prior to taking that first irreversible step.

  • Bell, Kris.  (2004).  “Pros and Cons of Being Your Own Boss.”  The ABC’s of Small Business.  Accessed January 31, 2007 from <https://www.abcsmallbiz.com/bizbasics/gettingstarted/pros_cons_boss.html>
  • Gerson, Vicki.  (March 22, 2004).  “Weighing the Pros and Cons and Starting a Business.”  National Federation of Independent Business.  Accessed January 31, 2007 from < https://www.nfib.com/object/4233480.html>
  • Helfand, David.  (2007).  “Pros and Cons of Starting a New Business, Buying an Existing Business, Investing in a Franchise and Becoming a Consultant.”  Find Law.  Accessed January 31, 2007 from < https://www.infirmation.com/articles/one-article.tcl?article_id=584>
  • “Pros and Cons of Starting a Small Business.”  (n.d.).  How-to Giudes.  Accessed January 31, 2007 from <https://www.howtobooks.co.uk/business/small-business/starting.asp>

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